Mobile Tool Franchise Guide

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Mobile Tool Franchise Guide: Franchise Resales

Franchise owners of mobile tool franchises (such as Snap-on Tools, Matco Tools, MAC Tools, & Cornwell Tools) complain that their franchises have little-to-no resale value.

[This post is a work in progress.  If you have input on the resaleability of mobile tool franchises, please share a comment below.]

An analysis of the the Matco Tools Franchise Disclosure Document by law firm Marks & Klein* (MATCO TOOLS Franchise Report Alleges Distributor Churning) reported:

“During the three year period from 1/1/08 to 12/31/10, seven hundred fifteen (715) Distributors, forty nine percent (49%) of the total number of MATCO Tools Distributorships open at any time during the period, left the MATCO system.

“Of that 715, only fifty (50) transferred their MATCO Tools business to third party franchisees…

“If a MATCO Tools distributor desired to exit the system during this three year period, and hoped to sell its business through a MATCO approved transfer, that franchisee had less than a seven percent (7%) chance of success. Statistically speaking, such a low success rate indicates that the MATCO Tools businesses run by distributors who were leaving the MATCO system were so unprofitable as to be unmarketable.”

“Everything Snap-on does is contrary to us gaining wealth” – Franchisee Jim Lager

On our post SNAP-ON TOOLS Franchise Complaints, Snap-on Tools franchise owner Jim Lager alleges his franchisor intentionally interferes with its franchisees’ efforts to sell their franchises:

i am trying to sell off franchises and there is no value what so ever in my business. Snap-on does everything they can to inhibit the sale diminish the value…

I am at least a little pissed off at Snap-on because i am trying to sell one of my franchises to one of my dealers. Believe me there is NO BLUE SKY in your business/job. Let me tell you why. snap-on has something called a schedule 1. This lists everything you as a selling dealer has to sale, Inventory, accounts recievable, truck, used tool, discontinued tools, computer, and other things you might sell a dealer. The schedule is bullshit because Snap-on credit will only finance 2 things on that schedule. Inventory and accounts recievables.

The kicker is the maximum accounts recievable or R/A they finance is $55,000.00. So if we do a good job and put a bunch of money on the street, turn it well, Snap-on rewards us by saying they wont finance it when we go to sell it. by the way you can’t go to a bank for financing because if you do, Snap-on tools, not Snap-on credit puts an all encompassing 1st lien against your business. NO BANK WILL TOUCH THIS AND TAKE A 2ND POSITION. Snap-on does this to keep routes cheap and bring in young naive guys with little education to run volume. Snap-on protects themselves. Everything Snap-on does is contrary to us gaining wealth. their training and even volume discount is designed for us to sell high volume at low profit margins.

Understand all my routes do between $10,000 and $14,000 a week. I am very succesful and always have been. snap-on only looks out for us when we force them to. I was a field manager in the 90′s. I will tell you you will never hear a discussion in Snap-on asking themselves what Snap-on did wrong when a dealer is failing. Here is how the discussion always goes. “What can we do to get rid of this guy and put another one in his place.”

…Snap-on loves fresh meat.

* Marks & Klein is a law firm with current litigation pending against Matco Tools & MAC Tools, and past litigation against Snap-on Tools on behalf of franchisees.

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Mobile Tool Franchise Guide: List of Calls (LOC)

Mobile Tool franchises typically provide franchisees with a “List of Calls.”

[Note:  This page is a work in progress.  Please feel free to suggest additions/corrections below.]

Matco Tools franchise FAQ states:  “Matco Tools gives new franchise owners a “List of Calls,” which contains at least 325 potential customer names and contact information. Each territory is identified by the District Business Manager through surveys and customer interviews. This helps eliminate time-consuming cold calls, while increasing productivity and sales… Each Matco Tools Franchise has their own territory and “List of Calls,” so you never have to worry about overlapping or competing with other franchise owners.”

Snap-on franchise website states:  “The very first day you start your new business, you will have an established list of calls with plenty of professional tool users within it. The list of calls each franchisee is assigned is an established, protected list that the franchisee visits each week. A solid foundation of existing and potential customers means you don’t have to wait for customers to come to you; they are expecting you to call on them.”

Mac Tools states:  “One of the best things about Mac Tools is that franchisees are given a ‘List of Calls’ containing at least 325 potential customer names and contact information. Each territory is identified by the Business Development Manager through surveys and customer interviews. This helps eliminate time-consuming cold calls, while increasing productivity and sales.”

Cornwell Tools website doesn’t mention a LOC, but states:  “…you will receive an area of responsibility with achievable sales potential that correlates to success… Geographic routes are assigned and surveyed by your District Manager for solid potential for new and repeat sales… Daily computerized printouts of customers at specific locations, their buying history, their potential needs, and their outstanding balances due are generated by special software available for Cornwell Dealers from an outside vendor.”

Here are some of the complaints alleged by Matco distributors and ex-distributors related to franchisees’ List of Calls (LOC).  The allegations are not necessarily true, but worthy of investigation for prospective franchisees:

- Some List of Calls do not provide enough sales potential for dbrs to be successful or even sustain the minimum purchase requirement

- Some LOCs contain outdated, inflated customer counts, closed shops & shops counted multiple times

- Some LOCs contain high percentages of lower-potential customers (lube shops, road techs, tire techs, older techs, students who can buy through corporate program, etc.)

- The number of potential customers in a LOC (325) is only guaranteed at signing.  That number will dwindle via attrition (shops closing, downsizing, etc.) and Matco is under no obligation to replace them.

- Some LOCs are geographically dispersed with unmanageable driving time and fuel costs.

- Distributors are forbidden to call on or sell to customers not on their LOC, even if customer requests them or is not being serviced

- Preferential treatment given to some distributors who are given leeway in calling on shops not on their LOC, others aren’t.

- Some claim Matco often prefers to put new or available customers on a LOC they can sell to a new franchisee rather than an existing distributor even if it is on their route or they are struggling

- Successful distributors had shops removed from their LOC to give to others, then were terminated when their sales declined below the minimum.

UnhappyFranchisee.com commenters provide this information and advice regarding Mobile Tool Franchise List of Calls (LOC) (If you have comments or corrections, leave them below):

Former Distr wrote:

Matco places emphasis on the List of Calls of at least 325 potential customers. One thing that may not be discussed or considered is ‘Quality’ of that list.

I have many customers that are in their 50′s and 60′s and their tool buying days are coming to a close. On the other end how many on the list are tire techs or lube techs that may never progress in the business?

Be aware of your potential customer base and their tool purchasing power, their income level, their desire to be a automotive or truck technician, many just need a job and have no desire to pursue a career in the industry. Others are truly pursuing a career.

Economic conditions vary across the country. Not sure how you can investigate it but are your customers credit worthy?

Analyze the shop on your list of calls in which these people work.

Is it just a small mom and pop shop, minimum wage/no benefits shop with a high turnover, or is it a High end progressive business, focused on quality, education and providing for future growth for their employees. These facts will help determine the quality and stability of your potential customer.

Be honest with yourself, out of the 325 potential customers, how many can afford to pay you to the terms necessary for you to survive the business. You need quality businesses with a low turnover rate.

Tommy Cheung wrote:

Signs to look out for:

-  overinflated head count, go to the shops listed and count the techs for yourself, do not include road techs that are never there, for example.

-  ask when you are given a shop in between distributors, and neither want goes to that shop, ask why?

-  check to see if you are going all over town, because the d.m. will try to find failed shops , just for headcount.

-  the d.m dosen’t visit every shop when doing a head count, some he will call and some he just copies from previous records.

Todd Allen Peterson:

Your Head Count will have close to the min. of 325 customers on your “List of Calls” Matco knows this is a low number because they want you to go out and establish more customers so they can start another guy on a route when they take them away from you. 325 customers in a none established route is a joke. I promise you will not be in the top of Matco Distributors unless you have around 500 min. to call on because the top guys every year have that many. If they say they only have 350 on their list of calls they are paper trailing some of their other accounts…

 

richard on November 27th, 2011 8:28 pm wrote:

i have seen…  other distributors were allowed to have customers, big spenders, in my area but we were told that we had an assigned area but i was told that we didnt have specific ares just a list of calls but i couldnt go in another distributors area to solicit from someone that he did not go to… there is too much greed and corruption going on here to even imagine for most people to comprehend… i have reported other distrubutors selling out from under me but it was okay because they were one of the good ol boys. you complain .they tell you to grow up. you try to play the way they play and its against the rules. its all bs…

 

Debbie*Lady Matco on November 30th, 2011 5:25 pm wrote:

Matco promised 325 potential customers.  NOT delivered – my List of Calls – is supposed to be certified mechanics that must purchase tools to do their jobs.  MY list is HIGHLY inflated and I have IN WRITING the proof to back it

guest2 on December 1st, 2011 2:18 am wrote:

I… drove my list of calls and reviewed all documents before signing and knew what I was getting onto. You still have to treat this as YOUR business and those distributors that do that do fine.

Former Distr on December 7th, 2011 10:17 am wrote:

I have my list of calls in front of me, the one that Matco will probably give to any prospective franchisee that is interested in my old route. The one that I provided to my Lawyer.

How can I service 80% of my route when

-3 shops, totaling 47 prospective customers are listed THREE times

-6 shops closed totaling 18 prospective customers

-employee counts are off by more than 20 people

- 6 shops were given to another distributor to call on – 26 prospective customers

PROSPECTIVE FRANCHISEE’s – DO NOT Trust the ‘List of Calls’. I don’t remember how much time you are given the list in advance of signing papers, but VISIT EACH AND EVERY SHOP ON THAT LIST PRIOR TO SIGNING!

In addition to the problems above, I had 3 shops on one road that REFUSED to allow Matco Tools in because of the previous Distributor.

Make sure you know how many in each shop actually buy tools. There is a difference between a ‘mechanic’ and a ‘tire tech’. Check for the number of ‘students’ working, they will not buy from you, they will buy through the Matco Tech Ed Program, that goes for Instructors too, I have three of those in my area, they also buy direct from the Tech Ed Program.

Relentless on December 8th, 2011 10:45 am

Wow! These statements imply that we have territories with our “List of Calls”. So we don’t have to Overlap. Very Interesting. Kind of implies you can call on shops as long as their in your territory.

Why would Matco tell you this to get you to sign and go to training, then when your successful come to you and make you give up the shops you established with your DM. My RM told me they were unsecured and I didn’t have a territory I had a “List of Calls” and if I didn’t comply “Yes” I could be terminated.

By the way this Distributors route was laid right over the top of me since I had established the shops and not gone off my route. Kind of contradicts the above statement. Don’t you think?

Former Distr on December 14th, 2011 11:47 am

The whole basis of your potential business is that List of Calls, and they neglect to even know if it is valid. I have written proof that it is a ‘fabricated’ list, and that no one ever personally visited the ‘calls’ to verify they were in fact even a business at that location.  This is fraud that goes all the way to the top.

Bob Tremblay on December 16th, 2011 7:40 pm

I became a Matco distributor in 2007. when seeding my route with my DM I found shops that were not on my list of calls a couple were not being serviced and he stated I could service them and he would add them to my list of calls. several other ones belonged to another Distributor.

when I finally got into my route I found out several of my shops here taken away from a couple other distributors. This did not make them happy and made it difficult for me to do business with them.  I also found out that my route was made up from a distributor that matco had terminated. he had 3 routes then downsized and went back to 1 route keeping the best shops. The portion of the route I received was the portion that he found to be unprofitable and wouldn’t service any more. Thats why Matco terminated him.

Debbie Solko on 2011/12/30 at 3:02 pm wrote:

Economic conditions of a area MUST be considered! Regardless of the stories otherwise, one MUST consider the reality of the buying ability of their potential customers. Research the average income of your prospective techs. As simple as a phone call or looking in the Want Ads If the local shop is only offering $10 – $12 hour and it I’d FLAT rate- How much will REALLY be left for these guys to buy tools ?? I know guys that simply can’t afford a $25 weekly payment Hell that is $100 bucks a month! Then there are the techs on a LOC that are seasoned veterans, they have a lot and NEED LITTLE! Ask yourself can you really get 200 of the guys that make so little to spend $25 week, every week?

Former WI Distributor on 2012/01/01 at 4:07 pm wrote:

I was with Matco for over 8 years and forced out due to low purchase average. After losing 15 – 20 shops in my territory I could not keep up with the economic downturn. After asking multiple times for an expansion to my route since the one next to me was vacant…I was shot down. My customer count (True) was in the area of 200-225. The new distributor now has both routes. I had to call on vacant areas 20 miles way to keep my TP going. My first 5 years were the best but when I started losing shops and asked for help I was thrown to the curb. Now after losing over $150k, Im determined to follow through with this lawsuit.

Matco has many fraudulent ways of doing business with all the risk on the Distributor…

[Note: This page is a work in progress. Please feel free to suggest additions/corrections below.]

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CORNWELL TOOLS Franchise Scam or No Scam?

“Eight former Cornwell tool dealers, including David Bachrach, sued Cornwell Quality Tools Company for compensatory and punitive damages, alleging common law deceptive trade practices, violation of Ohio’s Business Opportunity Law, fraud, fraud in the inducement, consumer fraud, negligent misrepresentation, and breach of fiduciary duty.

"The former franchisees brought class action claims in Summit County Common Pleas Court as representatives of a proposed class of nearly 500…

“The plaintiffs (eight former Cornwell tool dealers) have alleged that:

(1) Cornwell’s trade practice is to draw the plaintiffs and others into Cornwell’s sham enterprise;

(2) in the sale of a business opportunity to plaintiffs and others, Cornwell has not acted in conformity with the Business Opportunity Laws of Ohio;

(3) Cornwell committed fraud and fraud in the inducement in obtaining the franchise agreements from plaintiffs and others through material misrepresentations designed to greatly distort the risk involved in the franchise;

(4) Cornwell committed consumer fraud in connection with the sale of services; (5) Cornwell negligently misrepresented facts regarding the likelihood of success of the franchise to the damage of plaintiffs and others;

(6) Cornwell breached its fiduciary duty to its franchisees; and

(7) Cornwell acted with reckless disregard of its franchisees’ rights and well being. All of these claims stem from the formation of the contract and the contractual relationship whereby plaintiffs became franchisees of Cornwell. “

Source:  Bachrach v. Cornwell Quality Tool Co., (Ohio 2011)

The court determined that the matter was to be settled via private arbitration – so the proceedings and outcome may never be made public.

ARE YOU FAMILIAR WITH THE CORNWELL TOOLS DEALER FRANCHISE OPPORTUNITY?  IS IT A GREAT FRANCHISE OPPORTUNITY, A FRANCHISE SCAM OR NEITHER? PLEASE SHARE YOUR OPINION BELOW.

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